Traditional International Political Economy and Sham Trusts and Precatory Words: An Examination
The most important actor in a mercantilist economy is the state. By contrast, in an economy that favors liberalism, the individual is the most important actor (Oatley, International Political Economy, Fourth Edition).
Liberalism and mercantilism are schools of thought that provide frameworks for evaluating the consequences of resource allocation—whether by institutions such as the International Monetary Fund or by governments themselves.
In traditional mercantilism, national power lies at the center of resource allocation. It considers whether an alternative allocation of resources could enhance a nation's power within the international system (Oatley).
In contrast, traditional liberalism focuses on the welfare consequences of resource allocation. For example, a liberalist economy would favor alternative allocations of resources that improve the standard of living within society (Oatley).
This paper will examine how these schools of thought apply to the legal concepts of sham trusts and precatory words in English law.
Precatory words are expressions of hope or request in wills, such as: “I give my dearly beloved wife the whole of my property, feeling confident that she will act justly to our children” (Mussoorie Bank Ltd v Raynor [1882]). Courts—especially the House of Lords—have generally rejected the notion of precatory trusts, effectively abolishing the doctrine altogether.
Sham trusts, meanwhile, are equitable property arrangements where the written terms suggest the settlor has relinquished interest in the trust property, but in reality, the settlor has no intention of creating a trust as described. Certainty of intention is a critical requirement in English trusts law (The Law of Trusts, J.E. Penner, Oxford, 8th edition). Despite the House of Lords’ strict ruling against precatory words in Comiskey v Bowring-Hanbury [1905], it can still be difficult to determine whether someone intended to declare a trust or merely intended to make a future gift.
If courts were to adopt a traditional liberalist approach, they would be more inclined to construct trusts. The case of Burrough v Philcox [1840] illustrates this perspective. There, the will stated:
“But in case my son and daughter should both of them die without leaving lawful issue, then for the said estates to be disposed of as shall be hereinafter mentioned; that is to say, the longest liver of my two children shall have power, by a will properly attested in writing, to dispose of all my real and personal estates amongst my nephews and nieces or their children, either all to one of them, or to as many of them as my surviving child shall think proper.”
The court found a general intention that the nieces, nephews, and their children—all of them—should benefit. Viewing the trust instrument through a liberalist lens, the court focused on improving societal welfare, not just the testator’s precise language.
As Lord Cottenham stated:
“The Court will carry into effect the general intention and will not permit the objects of the power to suffer by the negligence of the donee.”
At that time, the courts were historically more inclined to find trusts to serve broader social purposes.
Conversely, under a traditional mercantilist approach, the state benefits more, and courts are less likely to find trusts. In Re Weekes’ Settlement [1897], a testatrix left property to her husband with the statement that he had a “power to dispose of all such property by will amongst our children in accordance with the power granted to him as regards the other property which I have under my marriage settlements.” The husband died intestate and without appointing shares, and the children argued that a trust had been created in their favor. The court, however, found no trust, concluding that the document did not support that construction.
Arguably, this reflects a mercantilist stance: by not finding a trust instrument, the property defaulted to intestacy rules, strengthening state authority over property distribution. A liberalist approach, by contrast, would have prioritized social welfare and likely found a trust in favor of the children.
